10/21/2019 08:50 EDT | Updated 10/21/2019 10:53 EDT

The Bay Likely To Go Private After Sweetened Buyout Offer

HBC may soon disappear from the stock market after execs accepted an offer from a group of shareholders.

Mark Blinch / Reuters
A woman holds a Hudson's Bay shopping bag in front of the Hudson's Bay Company (HBC) flagship department store in Toronto, Jan. 27, 2014.

TORONTO ― The Hudson’s Bay Co. board agreed Monday to a sweetened privatization offer that values the retailer at about $1.9 billion, but the deal will require support from minority shareholders if it is to be accepted.

The board said a group of shareholders led by HBC executive chairman Richard Baker group, which holds about a 57 per cent in the retailer, has agreed to pay $10.30 per share in cash to take HBC private.

HBC shares gained six per cent in early trading, but remained below the revised offer price. They traded at $10.05, up 60 cents, at the Toronto Stock Exchange, below a 52-week high of $10.76.

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The bid is nine per cent higher than an earlier offer of $9.45 per share by the group, following objections from two dissident shareholders ― Toronto-based Catalyst Capital and Land & Buildings Investment Management of Stamford, Conn.

Catalyst and L&B didn’t immediate respond to requests for comment.

The Baker group’s revised offer price represents a premium of 62 per cent compared with where the shares were trading before the shareholder group’s initial privatization proposal announced June 10, according the HBC board.

However, the board also said TD Securities had provided a special committee of directors with an estimate that HBC’s common shares had a fair market value of between $10 and $12.25 each, as of Oct. 20.

The board said the Baker-led group’s offer provides minority shareholders with “immediate and certain value″ that will expected to be higher than in the foreseeable future.

“Continued industry headwinds and the deterioration in operating performance have negatively affected the company’s financial results,″ the board said.

“The department store and specialty retail competitive landscape continues to evolve rapidly and the company will be required to invest substantial capital and resources to remain relevant to its customers and successfully compete.″

That has been the main message of the Baker-led group, which includes Rhone Capital, WeWork Property Advisors, Hanover Investments (Luxembourg) and Abrams Capital Management.

However, opponents of the Baker group have argued that they will essentially be able to fund the privatization from proceeds of HBC’s sales of its European operations ― announced the same day as the initial offer.

The deal is subject to the approval by a majority of the minority of HBC shareholders, excluding the shareholder group and its affiliates, and approval by a 75 per cent majority vote at a special meeting of shareholders.